Sustainable Economics

In 1776, Adam Smith published his world-changing volume “The Wealth of Nations” and with it the world-vision of economics and the accumulation of wealth immediately changed.

Smith’s treatise explained how money worked, how it allowed us to do business across broader regions and how economic decisions were based on needs compared to wants. He also expressed the value of increased market size in his explanation of how wealth was derived. More consumers, more wealth.

But Smith lived in a world that had a population of about 800 million, not 8.5 billion. Though the economic model of 1776 may have seemed sustainable, today this same model with its focus on consumerism is failing.

Considering the runaway economics of the 21st Century and our overuse of resources, we have to ask, “Is any economic model truly sustainable?”

Perhaps it’s more important to ask, “Can sustained economic growth and declining population coexist?” Or, said another way, what will the impact of declining populations be on economic stability and quality of life?

A sustainable economic path, unlike the production-based path of the past two centuries, will need to be more organic in nature. That is to say, it will be systemic and interrelated rather than specialized, and it will focus on efficiencies, rather than growing through increased sales and production.

Excess expenditures in resources will be reduced, it will be less polluting and collateral environmental degradation will be eliminated, and the outcome of these efficiencies will result in improved profitability overall.

Policy will need to be put into place to establish the evolving methodologies that will be required, driving changes in banking and investments, resource development, accountability for the use and damage to natural resources, and probably many other elements called for to yield a success in what will have to be a global, equitable model.

While there is no contemporary example of a sustainable economy, some of its foundation components have been achieved.

Fossil fuels powered the economic growth of the industrial revolution and the following eras since Smith’s economic fire storm of 1776. The population growth that paralleled the economic boom fed back on this production-based economy that has proven unsustainable.

It is only logical that solving the energy problem will prove to be a first step toward sustainability. Many nations are striving to achieve just that. From Costa Rica with its goals for 100% sustainable energy to Iceland with a hydrogen-centered energy program, or Germany with building codes demanding solar on every new building and the United States with a 41% growth in solar in 2013 alone, all are helping to move the world forward toward sustainability.

Economies are established to ensure quality of life; a sustainable economic structure in a world looking to reduce its population below 7 billion is achievable, but only if we step away from our production-based contemporary model and evolve to a new level based on efficiencies in a much more organic process.

To define sustainable economics in any other terms would be to commit our planet to continued, unsustainable growth that will continue to strip resources and damage the environment, and possibly prevent equitable processes from becoming the industrial and cultural norms for the future.

Establishing a sustainable economic model calls on the social sciences to formulate a successful path for the world to follow.